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Mapping Out the Repurposing Journey in the UK

Posted by Knight Frank Newcastle on 18th November 2024 -

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During our recent Property Performance event, teams across Knight Frank came together to discuss what repurposing means for commercial real estate across the UK.

Stephen Springham, Partner, Head of UK Markets and Retail Research at Knight Frank, kicked off the discussion by introducing the concept of repurposing as one of the most talked-about solutions in today’s commercial real estate landscape. He acknowledged that repurposing, alongside obsolescence, has become a buzzword in the industry, touted as a "silver bullet" for addressing the challenges facing real estate assets—particularly offices that are at risk of becoming obsolete or are underperforming. 

However, Stephen quickly pointed out that while the logic of repurposing might seem simple—converting an outdated or underperforming asset into one with higher market demand—the actual process is far more complex. The journey to repositioning and repurposing real estate is long and often fraught with challenges. Understanding this journey, navigating potential barriers, and unlocking value along the way are key themes that ran throughout the event. As Stephen summarised, “What does that journey look like? How can we ‘genetically re-engineer’ real estate? What are the keys to the Kingdom?” 

Part 1: Value underpins everything

Anna Emmison, Partner, Valuation and Advisory at Knight Frank, emphasised that value is the foundation of all decisions in commercial real estate. She explained that office buildings are not just physical structures but complex workplace ecosystems, and therefore appraising them requires both data-driven analysis and intuition. Despite the challenges, she underscored that value underpins every initiative in real estate, driving decisions and determining whether repurposing an asset makes financial sense. 

Anna critiqued the common notion of the "polarised market," where assets are either state-of-the-art or obsolete. She pointed out that the majority of office properties fall somewhere between these extremes and it is these assets which present the greatest valuation challenge. These are well-located but not in the absolute best locations and though they may require substantial investment to remain viable, the real question is whether the future value of the asset will justify such capital expenditure. 

In navigating this middle ground, Anna explained that valuers must work closely with other business advisors. Collaboration, she said, is essential in determining whether the occupational "DNA" of a city justifies further investment in an asset or whether it's time to consider an exit strategy.

Part 2: Potential through planning  

Stuart Baillie, Partner, Head of Planning at Knight Frank, tackled the often-daunting subject of planning, noting that it is frequently viewed as a source of uncertainty and risk. However, Stuart reframed planning as an opportunity, suggesting that having a well-thought-out planning strategy can unlock value and repurposing potential. He highlighted recent changes in the UK planning landscape, particularly the Labour Government's push to accelerate housing development and the growing use of Permitted Development Rights (PDR) for converting commercial buildings into residential properties. 

Stuart shared insights on how clients have increasingly turned to PDR due to its simplicity, quicker approval times, and the avoidance of affordable housing contributions. However, he cautioned against seeing PDR as the only route. Exploring alternative uses—such as hotels, leisure, life sciences, or even co-living spaces—could unlock even more value in some cases. The key is to develop the right planning strategy to fit the asset and its potential uses. This is where comprehensive advice from a planning consultant becomes essential. 

Part 3: What’s next?  

Abigail Heyworth, Partner in Development Strategy and Finance, expanded on the idea of repurposing by asking a critical question: what happens when the capital expenditure (CAPEX) required to refurbish an asset makes it unviable in its current use? She echoed Anna’s earlier point that value underpins everything and explained that when traditional office use no longer makes financial sense, it's essential to think outside the box and explore new ways to find new value and breathe new life into a building. 

Abigail highlighted that obsolescent office buildings are being transformed into Build to Rent and For Sale residential, student housing, hotels, care homes, co-living spaces, or even co-warehousing facilities. However, repurposing is not a one-size-fits-all solution. Each asset requires a custom approach, factoring in the building's location, fabric, and the "DNA" of the surrounding city. 

To illustrate, Abigail walked the audience through an example. 

Step 1: Office building A is located in a city location. The City DNA tells us that rents and demand for offices are falling and Anna has reported a market valuation which does not support the CAPEX required to bring it up to the required standards.  

Step 2: Stuart runs a high-level planning overview to check whether Permitted Development is an option and establish what alternative uses might be feasible in the location from a planning perspective.  

Step 3: The potential uses are analysed by Abigail’s team drawing on expertise from relevant sector specialists to evaluate the financial viability and demand for the options. 

Step 4: Utilise building consultancy specialists to understand to what extent building A can be repurposed or is redevelopment the right solution? 

Step 5: Create and execute the business strategy for our clients to establish how best to exit an asset, or not as the case may be.

The key to unlocking value lies in being proactive and forward-thinking about finding a new strategy for the asset. 

Henry Wyld, Partner in Capital Markets at Knight Frank, closed the session emphasising the overarching themes of value, performance, and the need for adaptability in today’s commercial real estate environment. He reiterated that real estate is not only a key contributor to the UK economy but also a significant source of carbon emissions. This environmental impact adds yet another layer of responsibility for real estate professionals to futureproof their assets. 

Henry challenged the audience: Are you prepared to adapt to falling office values? Do you have the appetite and liquidity to stay the course, or is it time for an exit? Navigating these complexities, he argued, is essential for driving performance and creating value. 

Henry introduced the Strategic Property Performance Initiative, led by Abigail and himself, designed to help clients tackle these challenges head-on. By taking a forward-looking approach to assets with depreciating value and proactively identifying strategies, clients can better navigate the repurposing journey and find their own keys to the kingdom. 

How can we support you? 

The first of our three-part sustainability series, Defining a Strategy, focuses on how to meet the commercial property retrofit challenge. Our research examines obsolescence and its impact and gives you practical guidance on formulating your decarbonisation strategy and driving property performance. 

Our UK Cities DNA research highlights what is currently impacting commercial real estate across the UK to provide a regional perspective that explores asset repositioning and other factors. 

We work holistically across consultancy teams to help our clients maximise their asset performance. Get in touch to find out how we can help.  


Jill Farmer

Knight Frank Newcastle is recognised as one of the most progressive and dynamic commercial property estate agent in the region and North East.

Link to Knight Frank Newcastle business profile

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